How UK tax codes work
Two people earn £40,000 a year. One pays £5,486 in income tax and the other pays £8,460, and the only difference between them is a few characters on the payslip.
Those characters are the tax code. Your employer uses it to decide how much of each payment is tax free, so it sets your take home pay more than any other single detail. HMRC chooses it, not your employer.
Reading a code
Most codes have a number and a letter. The number is your tax free amount for the year divided by ten, so £12,570 becomes 1257. The letter says something about your situation. The standard code for 2026/27 is 1257L.
Two extras can appear around it. A letter in front shows where you live for tax: S for Scotland and C for Wales. A W1, M1 or X on the end means the code is an emergency one, which we come back to below.
What the letters mean
- L: you get the standard personal allowance.
- M: you receive Marriage Allowance from your spouse or civil partner. They give up £1,260 of their allowance, which makes your code 1383M.
- N: you have given £1,260 of your allowance away, which makes your code 1131N.
- T: your code includes other items that HMRC wants to review, so it does not fit the standard letters.
- 0T: you get no allowance at all. It is common on a second job, or when HMRC does not yet have your details.
Codes that tax all your pay at one rate
BR taxes every pound from that job at the basic rate, which is 20%. D0 taxes it at the higher rate, 40%, and D1 at the additional rate, 45%. HMRC usually uses them for a second job or a pension, because your allowance has already been given to the first one. Scotland has its own versions, such as SBR. NT is rare and means no tax is taken.
K codes
A K code works backwards. It appears when the value of benefits or untaxed income, such as a company car or unpaid tax, is bigger than your allowance. Instead of reducing your taxable pay, the number is added to it. K100 adds £1,000. HMRC will not take more than half of a pay packet in tax because of a K code.
£40,000 on different codes
Here is the same salary in England under each code.
| Code | What it does | Income tax | Take home |
|---|---|---|---|
| 1257L | Standard allowance | £5,486 | £32,320 |
| 1383M | Marriage Allowance received | £5,234 | £32,572 |
| 1131N | Marriage Allowance given away | £5,738 | £32,068 |
| 0T | No allowance | £8,460 | £29,346 |
| K100 | Adds £1,000 to your taxable pay | £8,860 | £28,946 |
| BR | Everything taxed at 20% | £8,000 | £29,806 |
National Insurance is not in the tax column. It does not use your code and is the same on every row.
Emergency codes
If you start a job without a P45, your employer may have to use an emergency code ending W1 or M1. Each pay packet is taxed as if it were the only one in the year, so the allowance is spread evenly and bonuses can be hit hard. The tax you overpay comes back once HMRC has your details, or after the tax year through a P800 calculation.
Checking and fixing your code
Your code is on your payslip and in your personal tax account. HMRC also sends a coding notice when it changes. Tell HMRC if your circumstances move, for example a new benefit, a change of job or a Marriage Allowance claim. Codes are usually right for the main job, but they can lag behind changes, and a wrong one is the commonest reason for paying too much or too little.
To see your own figures, type your code into the calculator. For how the bands and the allowance fit together, read how UK income tax works. This is general information, not advice.
Keep reading
How UK income tax worksNational Insurance explainedHow a pension changes your take home payHow student loan repayments workThe £100,000 tax trap